Loan terms

Question 1

Finance Charge:

Answer 1

Any kind of fees or charges associated with obtaining credit and paid to the lender, broker or for their benefit

Question 2

Adverse Action:

Answer 2

When a borrower does not qualify according to the terms they desire, the lender can decide not to extend credit to them.

Question 3

APR:

Answer 3

Includes the percentage rate and financed costs of closing.

Question 4

Note rate:

Answer 4

The stated interest rate on a mortgage or loan agreement

Question 5

Promissory note:

Answer 5

The promise from a borrower that he will repay the loan

Question 6

Fully indexed rate:

Answer 6

In an ARM, this is the combination of the margin and the current index value.

Question 7

Securitization:

Answer 7

The pooling of loans to create mortgage backed securities for sale in the financial markets

Question 8

PITI:

Answer 8

Principle, Interest, Taxes and Insurance

Question 9

Qualifying ratios:

Answer 9

Calculations to determine whether a borrower can qualify for a mortgage. The two ratios are “housing expense ratio” and “total debt ration”

Question 10

Reconveyance:

Answer 10

A clause in a mortgage that conveys title to a borrower once the loan is paid in full

Question 11

Subprime:

Answer 11

Loans for borrowers who have either poor credit, an unstable income history, or high debt ratios.